Biodiesel Demand Drives Up Soy Oil Prices and Stokes Food Inflation

24 March 2021

Accelerating demand for renewable biodiesel fuels is further squeezing tight soybean supplies and pushing soybean oil futures prices to their highest levels in nearly a decade. 

Energy companies have announced plans to increase their biofuel capacity twofold to fivefold by 2030, using soybean oil as a major feedstock. Such a move is already stoking inflationary pressures worldwide in a host of vegetable oils, including canola, palm oil, as well as soybean oil, that serve as key ingredients for many food products. (Check out Gro’s Agricultural Price Indices for inflation trends.) 

Gro’s Futures Spread tool shows the strength of near-term demand for soybean oil. The so-called BO K-N spread, which compares the May vs. July contracts, is currently at an inverse of 3.1 cents/pound, only the second time there’s been an inverse in the past 15 years. On Monday, soybean oil futures prices closed limit up on the CME and are trading near highs not seen since 2012 at 57 cents/pound. 

Demand for renewable biodiesel fuel is being driven largely by California’s Low Carbon Fuel Standard (LCFS) rule and its expected impact nationwide. A new biodiesel plant, being constructed in North Dakota, will reach full production by the end of March, and vegetable oil cash prices in the state have soared, Gro data shows.  

Tight supplies and rising demand are pushing up prices of a broad range of vegetable oils, including palm and soy, the two most widely consumed edible oils. Join Gro for our webinar “What Is the Connection Between Palm Oil, Climate, and Global Supply Chains?” on April 8, as we demonstrate new methods for monitoring climate risk and preventing supply disruptions for this key commodity. 

This insight was powered by the Gro platform, which enables better and faster decisions about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, which allows users to derive valuable insights such as this one. You can explore the data available on Gro with a free account, or please get in touch if you would like to learn more about a specific crop, region, or business issue.

 

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